Accenture Falls as Forecast Trails, Dragging Down IBM

Before today, Accenture, which ranks second to IBM in consulting revenue, had jumped 21 percent this year through yesterday, outperforming IBM’s gain of 2.1 percent. Photographer: Scott Eells/Bloomberg

June 28 (Bloomberg) -- Accenture Plc, the world’s second-largest technology-consulting company, tumbled the most in four
years after its sales forecast trailed analysts’ estimates.

The stock fell as much as 14 percent to $69 in New York
trading, the biggest intraday decline since March 2009. The
plunge dragged down stocks of rivals, including International
Business Machines Corp.

Accenture is grappling with a change in the behavior of its
clients, who in recent quarters have been deferring decisions on
short-term contracts and favoring longer-range information-technology projects. That means investors have to get used to
waiting for the revenue to show up.

“They’ve got this continuous strength in bookings but this
inability to gain traction on revenue, and it’s becoming a
growing concern,’ said Josh Olson, an analyst at Edward Jones &
Co. in Des Peres, Missouri. ‘‘The fourth quarter is going to be
a challenge, and the trend could play out into their next fiscal
year.” Olson has a hold rating on the shares.

IBM slipped 3.1 percent to $189.50 at 10:05 a.m. New York
time, while Cognizant Technology Solutions Corp. fell 0.8
percent to $62.60. Before today, Accenture, which ranks second
to IBM in consulting revenue, had jumped 21 percent this year
through yesterday, outperforming IBM’s gain of 2.1 percent.

Fiscal fourth-quarter revenue will be $6.7 billion to $7
billion, Dublin-based Accenture yesterday in a statement. That
fell short of the $7.36 billion average estimate of analysts,
according to data compiled by Bloomberg.

‘Missing Guidance’

Third-quarter net income attributable to Accenture rose 18
percent to $810.3 million, or $1.21 a share, from $689.2
million, or $1.03 a share, a year earlier. Excluding a reduction
in reorganization liabilities, earnings were $1.14 a share in
the period, which ended in May. Analysts had predicted $1.13 on
average, according to data compiled by Bloomberg.

“We’ve had some areas of our business where the activity
is much different than we would have expected, some of which
would have been tough to predict,” David Rowland, Accenture’s
new chief financial officer, said on a conference call. “We are
not in the business of missing guidance and we don’t find that
to be acceptable, so that would not be our expectation going
forward.”

Accenture is considered a bellwether for the information-technology market because its earnings cycle ends one month
sooner than competitors. Revenue for the quarter was $7.2
billion, missing the $7.43 billion analysts had predicted on
average.

Early Look

“We always want to get an update from them on the overall
IT services spending environment,” said Jason Kupferberg, an
analyst at Jefferies LLC in New York. “The numbers have not
looked great.”

The company is seeking to boost growth by expanding its
Accenture Interactive division, which caters to chief marketing
officers who want to improve their investments in Internet
outreach. Accenture announced plans in May to spend $316 million
to buy Hong Kong-based marketing company Acquity Group Ltd. to
bolster the effort.

IBM, based in Armonk, New York, is scheduled to report its
earnings in three weeks.